Chapter 13 Debt Relief Lawyers

Debt Consolidation

Chapter 13, often called a debt reorganization or consolidation, allows you to repay your debt over time.  This is especially useful if you are behind on your mortgage or owe money to the IRS.  In addition, Chapter 13 allows you to discharge more types of debts than Chapter 7 does. 

Avoid Foreclosure

One of the biggest advantages for many people is that Chapter 13 allows them to keep their homes and avoid foreclosure.  A chapter 13 allows you to cure a mortgage default.  In other words, it allows you to repay over time the monthly mortgage payments on which you have fallen behind.  You can not do this with a debt consolidation company or in a chapter 7 bankruptcy. 

Eligibility

You may file for chapter 13 bankruptcy so long as you are a regular wage earner and you have less $336,900 in unsecured debt or more than $1,010,650 in secured debt.  .Corporations and partnerships are not eligible to file for relief under Chapter 13, but self-employed individuals and those who own unincorporated businesses may file a  Chapter 13 petition.

Automatic Stay

A Chapter 13 proceeding begins by filing a petition. As in Chapter 7 cases, the filing of the petition automatically stops creditors from trying to collect debts from them.  There is also a special automatic stay provision in Chapter 13 that protects co-debtors who do not file a bankruptcy petition.  For example, a chapter 13 protects the friend or relative that co-signed a car loan, as well as the debtor.

Chapter 13 Repayment Plan

Along with the petition, you must propose  a repayment plan that sets forth the details of how you intend to pay your creditors over the next three to five years.  It is important for your plan to be well thought out so that it meets the standards of the U.S. Bankruptcy Code.  The skilled attorneys at Kathryn L. Harry & Associates P.C. are skilled in drafting repayment plans that meet the bankruptcy code requirements and the office of the U.S. Trustee. 

Bankruptcy Trustee

The amount you repay your creditors is largely dependent your disposable income and the amount of money your creditors would be likely to be paid in the event you were to liquidate your non-exempt assets in a chapter 7 bankruptcy.  At the time of the filing of your petition, a trustee is appointed to manage the payments under the plan.  The plan, which must provide for fixed payments to a trustee on a monthly basis, will be submitted to the court for approval. Within 30 days of filing, you must start making payments under the plan to the trustee, even if the court has not yet approved the plan.  Once the plan is approved, the trustee will distribute funds to your creditors according to the terms of the plan and the priorities set forth in the bankruptcy code.

Meeting of Creditors

Within 20 to 50 days after the petition is filed, the trustee holds a meeting of creditors, also known as a 341 meeting.  You must attend this meeting with your attorney and answer questions regarding your current and recent financial conditions.  You must also provide proof of your income.  The trustee may recommend your plan for confirmation by the judge if your plan is feasible and meets the requirements of the bankruptcy code.  Or, in the alternative, the trustee may make suggestions at to how the plan might be modified so that it becomes feasible and meets the Bankruptcy Code's standards for confirmation before the plan is presented to the judge at the confirmation hearing. If approved, the trustee will distribute funds to the creditors according to the plan's terms.

Payments to Creditors

Creditors are paid if they file a claim in your bankruptcy case.  There are three types of claims: (1) priority claims, which include most taxes and the costs of the bankruptcy proceedings; (2) secured claims, which are those for which you have pledged collateral, like a car loan and (3) unsecured claims, like credit card debts or medical bills.  The plan must pay priority claims in full.  Unsecured claims do not need to be paid in full as long as the plan provides that you will pay all of your disposable income to the trustee and as long as unsecured creditors would receive at least as much under the plan as they would if your assets were being liquidated under Chapter 7.

Order of Discharge

Once you complete all payments under the plan, and complete an approved financial management course, you will receive a discharge order, which relieves you from all debts provided for or disallowed by the court under the plan.